Enron’s Skilling Seeks Bail While Appealing Fraud Convictions

July 29 (Bloomberg) -- Convicted ex-Enron Corp. Chief
Executive Officer Jeffrey Skilling, claiming a June U.S. Supreme
Court ruling entitles him to a new trial, asked an appeals court
to release him from prison on bail while he pursues an appeal.

“Jeffrey Skilling should immediately be released on bail
pending this court’s ruling on his case on remand,’’ Daniel
Petrocelli, Skilling’s lawyer, said in a bail request filed
yesterday with the U.S. Court of Appeals in New Orleans.

Skilling, 56, is serving a 24-year sentence after a Houston
jury convicted him for leading what prosecutors said was a
widespread accounting fraud that deceived investors about
Enron’s true financial condition. In June, the high court ruled
in Skilling’s favor, saying he was prosecuted under a law
barring honest services fraud that doesn’t apply to his case.

Skilling also asked that his convictions be reversed and he
be retried by a lower-court jury that isn’t allowed to consider
honest-services fraud in weighing his guilt or innocence.

“Because it is impossible to know whether the jury
convicted Skilling on any of the 19 counts without relying on
the honest-services theory, all 19 counts must be reversed, and
Skilling must be retried before a jury that is not permitted to
rest any count of conviction on a legally invalid fraud
theory,’’ Petrocelli wrote to the appellate court.

Tracy Schmaler, a spokeswoman for the Justice Department,
said after the Supreme Court ruling that the government “will
vigorously defend’’ the Skilling case when it returns to the New
Orleans appeals court.

Flight Risk

Petrocelli said that courts have on six previous occasions
found that the former Enron executive wasn’t a flight risk.

“A decision to skip bail would be all the more irrational
now that Skilling has won a landmark victory in the Supreme
Court, completed close to four years of his sentence, and has
every intention of continuing to pursue his legal rights to
clear his good name - as he has been doing for some nine
years,’’ the lawyer wrote.

Petrocelli called the court’s attention to a Chicago
appeals court’s decision on July 21 to release former Hollinger
International Inc. Chief Executive Conrad Black from prison on
$2 million bail while it reviews his convictions. Black won a
Supreme Court ruling on the same day and on the same grounds as
Skilling.

Skilling was found guilty in May 2006 of 19 criminal counts
including conspiracy, fraud, lying to auditors and insider
trading. The same jury convicted former Enron founder Kenneth
Lay, who died six weeks later and whose verdicts were erased as
he’d had no chance to appeal.

Bribery, Kickbacks

Writing for the Supreme Court on June 24 of this year,
Justice Ruth Bader Ginsburg said the law, which covers fraud
schemes to “deprive another of the intangible right to honest
services,’’ applied only to instances of bribery or kickbacks.

The appeals court must determine the extent to which
prosecutors relied on the honest services prohibition in
persuading jurors to convict Skilling, who wasn’t accused of
bribery or kickbacks.

Ginsburg said the court’s decision “does not necessarily
require reversal of the conspiracy conviction.’’ She said
prosecutors could argue that their reliance on the honest-services provision was “harmless’’ because jurors would have
convicted Skilling of conspiracy, regardless. Prosecutors
offered evidence that Skilling had conspired to engage in
securities fraud, in addition to honest-services fraud.

Ginsburg also said the high court wasn’t addressing
Skilling’s contention that his entire conviction hinged on the
conspiracy count and thus must be thrown out. Skilling’s lawyers
claim all the counts are tainted.

‘Erroneous’ Theory

“The government cannot now exclude the possibility that
the jurors applied the erroneous honest-services fraud theory to
convict Skilling for conspiring to commit an act of fraud that
does not legally exist, and then applied that finding to convict
Skilling on every other count,’’ Petrocelli said in court papers
filed yesterday.

Prosecutors also urged jurors to wrongly convict Skilling
for the illegal acts committed by other Enron employees under
the theory that each conspirator is equally guilty of all acts
in the scheme, Petrocelli said.

“For every securities-fraud count, one or more of
Skilling’s alleged co-conspirators testified that they
themselves had committed the acts of securities fraud at issue
(and in many cases formally pled guilty to them), while Skilling
himself often had little involvement in the statement (or
underlying conduct affecting the statement),’’ Petrocelli said.

Parallel Enron Case

Petrocelli also called the New Orleans appellate court’s
attention to an earlier ruling it made in a parallel Enron case,
reached three months after Skilling’s conviction, which rejected
the honest-services theory. Relying on that decision, U.S.
Circuit Judge Patrick Higginbotham said in a later ruling
concerning Skilling’s bail that there were “serious frailties’’
in 14 of the 19 counts against him.

At that same time, Higginbotham wrote that Skilling
“raises no substantial question that is likely to result in the
reversal of his convictions on all of the charged counts.’’ He
denied Skilling’s request to remain free on bond while he
appealed his case. The former executive is serving his sentence
in a federal prison in Englewood, Colorado.

More than 5,000 jobs and $1 billion in employee retirement
funds were wiped out when Enron plunged into bankruptcy
following the revelation of widespread accounting fraud. The
December 2001 bankruptcy of what was then the world’s largest
energy trader cost investors more than $60 billion in market
losses.

The case is U.S. v. Skilling, 06-20885, U.S. Court of
Appeals for the Fifth Circuit (New Orleans).